Forexpros – Crude oil futures held steady in thin trade on Thursday, fluctuating between small gains and losses as markets awaited the outcome of a closely-watched auction of long-term Italian debt.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD99.55 a barrel during European morning trade, adding 0.18%.
The February contract traded between a range on USD99.16, the daily low and USD99.86, the session’s high.
Trading volumes were expected to remain thin ahead of the New Year holiday weekend, resulting in low liquidity and irregular volatility.
Italy was scheduled to sell EUR8.5 billion of long-term debt maturing between 2014 and 2022 later Thursday
The auction is seen as the first test of European banks’ willingness to purchase long-term sovereign debt of distressed euro zone countries, following last week’s nearly EUR500 billion cash infusion by the European Central Bank.
Ahead of the auction, the yield on Italy’s ten-year bonds traded at 7.02%, just above the 7% threshold widely viewed as unsustainable in the long-term.
Euro zone developments have dominated trading in the oil market for the last several months, amid worries that the sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil.
Meanwhile, markets were also awaiting key weekly government data on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer.
The report was expected to show that U.S. crude oil stockpiles fell by 2.5 million barrels last week, while gasoline supplies were forecast to decrease by 0.5 million barrels. The data was being released a day later than usual due to the Christmas holidays.
After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories surged by 9.6 million barrels last week, confounding expectations for a 1.6 million barrel drawdown.
Oil prices dropped nearly 2% on Wednesday, the biggest decline in nearly two weeks as a broadly stronger U.S. dollar and receding fears over a disruption to Iranian oil supplies weighed on prices.
A senior Saudi oil official said Wednesday that Gulf Arab nations are prepared to offset any potential loss of Iranian oil in the world market.
The comments came after Iran’s first vice-president warned that the flow of oil through the Strait of Hormuz would be stopped if foreign sanctions were imposed on Iran’s crude exports over its nuclear ambitions.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery rose 0.35% to trade at USD107.94 a barrel, with the spread between the Brent and crude contracts standing at USD8.39 a barrel.
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